Editor's Note:

The U.S. stock market surged higher on what looks like short covering after the Federal Reserve announced a $10 billion a month reduction in its QE program.

IWM and TIF hit our entry triggers.
WDC was closed as planned.
IBM and KSU hit our stop loss.


Current Portfolio:


CALL Play Updates

Advance Auto Parts - AAP - close: 109.27 change: +0.87

Stop Loss: 107.95
Target(s): 117.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to January option expiration
New Positions: Yes, see below

Comments:
12/18/13: AAP briefly dipped below its simple 10-dma before bouncing back. More nimble traders may want to buy today's intraday bounce and use a stop just below today's low (106.88) as an alternative entry point. We are still suggesting an entry trigger at $110.65.

Earlier Comments:
We are suggesting a trigger to buy calls at $110.65. If triggered our short-term target is $117.50. Longer-term traders may want to aim higher since the Point & Figure chart for AAP is bullish with a $140 target.

Trigger @ 110.65

- Suggested Positions -

buy the Jan $110 call (AAP1418a110)

Entry on December -- at $---.--
Average Daily Volume = 923 thousand
Listed on December 14, 2013


Allergan, Inc. - AGN - close: 101.13 change: +2.06

Stop Loss: 97.75
Target(s): 104.00
Current Option Gain/Loss: +60.0%
Time Frame: Exit prior to January option expiration
New Positions: see below

Comments:
12/18/13: The market's afternoon rally pushed AGN back above $100 and shares closed at a new six-month high. I am raising our stop loss to $97.75.

The Point & Figure chart for AGN is bullish with a $110 target.

- Suggested Positions -

Long 2014 Jan $100 call (AGN1418a100) entry $2.00

12/18/13 new stop loss @ 97.75
12/16/13 adjust exit target to $104.00
12/06/13 triggered on gap higher at $98.02, suggested trigger was $97.00

Entry on December 06 at $98.02
Average Daily Volume = 1.9 million
Listed on December 05, 2013


Aon Plc. - AON - close: 83.93 change: +2.11

Stop Loss: 81.30
Target(s): 84.85
Current Option Gain/Loss: +67.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/18/13: We were starting to worry about the lack of movement in shares of AON. Thankfully the stock redeemed itself with a +2.5% surge to new highs.

Please note that we are moving the stop loss to $81.30 and moving the exit target to $84.85.

- Suggested Positions -

Long 2014 Jan $82.50 call (AON1418a82.5) entry $1.70

12/18/13 new stop loss @ 81.30, adjust exit target to $84.85
12/17/13 new stop loss @ 80.90
12/07/13 new stop loss @ 80.75
11/23/13 new stop loss @ 79.85
11/18/13 new stop loss @ 79.45
11/13/13 new stop loss @ 78.75

Entry on November 08 at $80.50
Average Daily Volume = 2.3 million
Listed on November 06, 2013


3D Systems - DDD - close: 81.99 change: +0.61

Stop Loss: 78.90
Target(s): 89.00
Current Option Gain/Loss: - 9.6%
Time Frame: exit PRIOR to January option expiration
New Positions: see below

Comments:
12/18/13: DDD was making headlines today with news they were buying part of Xerox's product design, engineering, and chemistry group for $32.5 million.

Shares of DDD tested short-term technical support at its 10-dma near $79.20 before bouncing back into positive territory.

More conservative traders may want to wait for DDD to trade above its December 11th high of $82.65 before initiating positions.

Keep in mind that DDD shares can be volatile. I am suggesting we keep our position size small to limit our risk.

*small positions* - Suggested Positions -

Long Jan $85 call (DDD1418a85) entry $3.54

Entry on December 17 at $82.05
Average Daily Volume = 5.7 million
Listed on December 14, 2013


Illumina Inc. - ILMN - close: 104.62 change: +2.61

Stop Loss: 99.45
Target(s): 109.00
Current Option Gain/Loss: +11.7%
Time Frame: Exit PRIOR to 2014 January option expiration
New Positions: see below

Comments:
12/18/13: ILMN continued to show relative strength today after garnering more bullish analyst comments. The stock outperformed with a +2.5% gain and closed at a new high.

Earlier Comments:
Further gains could spark some short covering since the most recent data listed short interest at 26% of the 125 million-share float.

Our target is $109.00. More aggressive traders may want to aim higher since the point & figure chart is bullish with a $146 target. P&F chart readers will also notice that ILMN is about to produce a new triple-top breakout buy signal.

NOTE: Biotech stocks can be volatile and the wrong headline could send shares gapping lower. Investors may want to limit their position size.

- Suggested Positions -

Long 2014 Jan $105 call (ILMN1418a105) entry $3.40

12/16/13 new stop loss @ 99.45

Entry on December 11 at $102.00
Average Daily Volume = 931 thousand
Listed on December 09, 2013


Russell 2000 ETF - IWM - close: 112.88 change: +1.53

Stop Loss: 109.25
Target(s): TBD
Current Option Gain/Loss: +28.6%
Time Frame: exit PRIOR to January option expiration
New Positions: see below

Comments:
12/18/13: The IWM performed well today. Shares hit our upside trigger at $111.65 before the market's big rally post-Fed meeting. You got multiple chances to buy calls at our trigger today. The IWM closed at its high of the day, which should bode well for tomorrow.

Earlier Comments:
We're not setting a target price yet. It will probably be in the $115-120 zone.

- Suggested Positions -

Long 2014 Jan $112 call (IWM1418a112) entry $1.78

Entry on December 18 at $111.65
Average Daily Volume = 35 million
Listed on December 17, 2013


Michael Kors - KORS - close: 84.19 change: +1.28

Stop Loss: 79.90
Target(s): 89.00
Current Option Gain/Loss: +16.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
12/18/13: Today's widespread market rally finally pushed KORS convincingly through resistance near the $83.00 area. If you were looking for a momentum breakout entry point then this would qualify. More conservative investors may want to raise their stop loss.

- Suggested Positions -

Long 2014 Jan $85 call (KORS1418a85) entry $1.85

12/14/13 new stop loss @ 79.90
12/07/13 new stop loss @ 78.49, readers may want to consider an early exit right here
11/22/13 trigger hit at $81.05
11/21/13 adjust entry strategy. Instead of buying a dip at $76.50, move the entry trigger to $81.05. Adjust the stop loss to $77.75. Adjust the option strike to 2014 Jan. $85 call.

Entry on November 22 at $81.05
Average Daily Volume = 7.2 million
Listed on November 20, 2013



Lockheed Martin - LMT - close: 143.73 change: +2.88

Stop Loss: 137.75
Target(s): 149.00
Current Option Gain/Loss: +34.3%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/18/13: The rally in LMT accelerated with a +2.0% gain. Shares closed just below resistance near $144.00 (its late November highs). I would not be surprised to see a short-term pullback here.

Earlier Comments:
Our multi-week target is $149.00. Keep in mind that the $144-145 area is currently overhead resistance.

I'm listing the March calls. If you want to take a more short-term approach then the 2014 January calls are much cheaper.

- Suggested Positions -

Long Mar $145 call (LMT1422C145) entry $3.35

Entry on December 16 at $140.25
Average Daily Volume = 2.0 million
Listed on December 14, 2013


Tiffany & Co - TIF - close: 91.47 change: +1.15

Stop Loss: 88.45
Target(s): 98.50
Current Option Gain/Loss: + 0.0%
Time Frame: exit PRIOR to February option expiration
New Positions: see below

Comments:
12/18/13: The market's afternoon rally lifted TIF to a new high. Shares hit our suggested entry point at $91.25. I would still consider new positions at current levels.

Earlier Comments:
The Point & Figure chart for TIF is bullish with a $102 target.

- Suggested Positions -

Long FEB $95 call (TIF1422b95) entry $2.15

Entry on December 18 at $91.25
Average Daily Volume = 1.25 million
Listed on December 16, 2013


United Parcel Service - UPS - close: 102.98 change: +1.00

Stop Loss: 100.45
Target(s): 108.00
Current Option Gain/Loss: -22.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
12/18/13: UPS' main rival, FedEx (FDX), reported earnings this morning before the opening bell. FDX missed Wall Street's earnings estimate by 8 cents but raised its guidance. This bullish guidance should be good news for UPS as well.

Shares of UPS dipped to their simple 30-dma this afternoon before bouncing back to a new closing high. It's worth noting that shares of UPS are sitting on resistance at the $103.00 level.

A breakout past $103.00 could be used as an alternative entry point although you may want to buy April calls.

- Suggested Positions -

Long 2014 Jan $105 call (UPS1418a105) entry $0.98

12/12/13 new stop loss @ 100.45
11/23/13 new stop loss @ 99.75
11/20/13 new stop loss @ 98.95

Entry on November 14 at $101.25
Average Daily Volume = 3.8 million
Listed on November 13, 2013




PUT Play Updates

Sears Holdings - SHLD - close: 43.95 change: -0.50

Stop Loss: 48.60
Target(s): 40.15
Current Option Gain/Loss: - 3.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/18/13: SHLD continues to show relative weakness with a -1.1% decline today. The fact that SHLD did not participate in today's very widespread market bounce this afternoon is a very good sign for the bears.

Earlier Comments:
Our short-term target is $40.15. Keep in mind that there are already a lot of bears in this stock. The most recent data listed short interest at 56% of the 50.7 million share float. That's plenty of fuel for a short squeeze if the stock can bounce. It's another reason to keep your position size small.

- Suggested Positions - *small positions*

Long 2014 Jan $39 PUT (SHLD1418m39) entry $1.66

12/16/13 new stop loss @ 48.60

Entry on December 12 at $46.18
Average Daily Volume = 1.5 million
Listed on December 11, 2013


CLOSED BULLISH PLAYS

Western Digital Corp. - WDC - close: 82.10 change: -1.30

Stop Loss: 77.70
Target(s): 84.75
Current Option Gain/Loss: +54.0%
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
12/18/13: After missing our exit target by five cents yesterday we decided in last night's newsletter it was time to exit our WDC trade. The plan was to exit at the opening bell. Shares saw a small gap down at $83.28 and then plunged toward the $80.50 area. WDC's failure to participate in the market's post-FOMC meeting rally is a bit surprising.

Our option gapped down from $5.15 to $4.85 (with a 15-cent spread).

- Suggested Positions -

2014 Jan $80 call (WDC1418a80) entry $3.05 exit $4.70 (+54.0%)

12/18/13 planned exit at the opening bell
12/17/13 prepare to exit tomorrow morning at the open.
WDC missed our exit target by 5 cents. We want to go ahead and exit early.

chart:

Entry on December 16 at $80.25
Average Daily Volume = 1.9 million
Listed on December 12, 2013


CLOSED BEARISH PLAYS

Intl. Business Machines - IBM - close: 178.70 change: +2.94

Stop Loss: 178.65
Target(s): 170.25
Current Option Gain/Loss: -41.9%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/18/13: With the market surging higher on Wednesday after the FOMC meeting it was not a surprise to see IBM catching a bid. The stock pushed its way past resistance near $178.00 and hit our stop loss at $178.65.

The long-term trend is still down. Keep an eye on potential resistance at the top of its bearish channel (see chart).

- Suggested Positions -

Long 2014 Jan $175 PUT (IBM1418m175) entry $3.15 exit $1.83 (-41.9%)

12/18/13 stopped out
12/14/13 readers may want to take profits now with IBM testing its October lows.
12/09/13 new stop loss @ 178.65

chart:

Entry on December 03 at $176.90
Average Daily Volume = 5.1 million
Listed on December 02, 2013


Kansas City Southern - KSU - close: 120.80 change: +3.32

Stop Loss: 119.50
Target(s): 114.00
Current Option Gain/Loss: -35.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/18/13: The transportation industry and the railroad stocks were strong performers today. KSU outperformed them both with a +2.8% bounce and a rally back above resistance at $120 and its 50-dma. Our stop loss was hit this afternoon at $119.50.

- Suggested Positions -

2014 Jan $115 PUT (KSU1418m115) entry $2.40* exit $1.55 (-35.4%)

12/18/13 stopped out
12/16/13 new stop loss @ 119.50
12/11/13 triggered @ 117.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

chart:

Entry on December 11 at $117.75
Average Daily Volume = 486 thousand
Listed on December 07, 2013